Russia Is Sliding Into a Self-Reinforcing Cycle of Cultural Repression That Will Destroy the Nation

Those of you who study history will know that there can now be little doubt that the future of Russia is in serious jeopardy. Personally, short of an unexpected event or political uprising, I don’t see how they escape from the cycle that has begun, which has been accelerating if you’ve been paying attention to the country over the past twenty four months. The Russian people have been willingly submitting themselves to slavery, passing laws that restrict freedom of speech, freedom of conscious, freedom of religion, freedom of personal association, and much more. It’s as if they simply cannot escape a culture of authoritarian rule, always sliding back toward despotism.

I’ve avoided writing this essay for a year, but the evidence continues to grow and I cannot see a way out of it any longer. Russia has been on my radar for some time, but my study of it has increased exponentially because of the energy holdings I’ve been buying as many of those companies and partnerships hold ownership or operating stakes in Russian oil fields. We are, I believe, past the point of no return.

The developments are merely a symptom. The truth is the Russian culture has been sick for awhile based on the cold, logical data. Whereas in the United States, murders, abortions, muggings, sexual assaults, and other crimes have been collapsing to all-time lows, Russia has been experiencing the opposite. Russia and her sister countries, those that only recently broke out from under Russian rule or are still effectively Russian in all but name only, have the highest abortion rates in the world, suffer one of the highest murder rates on the planet, have a population with a rampant alcoholism addiction, as well as very high suicide rates. The social conditions are abysmal; the demographics non-sustainable.

These sorts of laws reduce a population to a pathetic sort of infantilism, where simply having your feelings hurt, or having to deal with reality as it is and not how you think it should be, is enough to take violent action against your neighbor by depriving him or her of life and liberty. It perpetuates a cycle of denial and anti-scientific discovery.

The Culture of a Nation is Just as Important, if Not More Important, Than Its Natural Resources

Although Russia is often thought of as a world economic power, the reality is far different. Russian standards of living are horrible compared to most first world economies. GDP per capita is laughingly low, at $14,247, compared to nations like Australia at $67,723, Denmark at $56,202, Canada at $52,232, the United States at $49,922, Japan at $46,736, Germany at $41,513, France at $41,141, the United Kingdom at $38,589, Italy at $33,115, Israel at $31,296, and South Korea at $23,113. Much of this has to do with the culture. Russia certainly has the natural resources to exploit, so the problem is not in the ground, it’s in the minds of the Russian people.

Think of culture as a sort of software program. It defines the parameters of what the system will accept. It is made up of the individual preferences and traditions of the people, emerging as a sort of unified zeitgeist. Culture, in a corporation or in a country, can overcome almost anything else.

That is why nations such as the United States, for all her flaws, continue to hold roughly 50% of the world’s wealth, and a vastly disproportionate percentage of the world’s technological inventions, patents, and discoveries. It is not because it is somehow better, or her people are somehow smarter, than the rest of the world. It’s the culture. The software program, built upon a certain form of Protestant work ethic and free scientific discovery after the nation was birthed out of the humanist enlightenment ideals of the 18th century, resulted in a unique mix of beliefs and behaviors that has been a source of constant discussion since Alexis de Tocqueville penned the now classic Democracy in America, seeking to explain to the French why democratic self-rule worked in the United States but few other places. He then took those lessons, and applied what he could to France, helping it rise from the ashes of the French revolution to become one of the largest and most prosperous economies in the world.

Here, in the United States, the very notion of hate speech is unconstitutional – you can stand at the White House gates with racist, bigoted signs, screaming about how much you hate the President of the United States and you can’t go to jail for it. Here, in the United States, do you think the researchers at Harvard care whether or not they find something that will disprove or discredit a particular religion? No! They are interested in finding the truth, supported by facts and evidence. Here, in the United States, Silicon Valley has a disproportionate percentage of gay and lesbian employees relative to other industries because they are interested solely in cognitive ability. We just want your best ideas and for you to be happy. Here, in the United States, women aren’t forced to cover their faces or be separated from men because we don’t treat them like animals, cutting off half of our human capital. All of these things work together to overcome a lot of our institutional incompetence. That is, the culture, and the forces it drives, has saved us from the gross incompetence of our own elected representatives.

In a country like Russia, you have a cultural code that is actively suppressing free scientific discovery, the ability to speak and debate about ideas, and throwing away a considerable percentage of the brain power because certain citizens aren’t deemed acceptable due to their personal characteristics.

All else being equal, a society that is repressed will always fall behind a society that is free. That is because the free society can take advantage of all of its resources; all of its minds; all of its talents; all of its citizens. They tend to be happier, more satisfied, and thus do better work.

If Russia were a stock, I wouldn’t be going long at the moment. All evidence points to it falling further and further behind global progress, becoming less relevant and more miserable. Were I a Russian citizen, I would be out of there right now, with my eyes on a nation such as Canada or Switzerland. It’s teetering on the edge of a series of policies and laws that will create their own sort of self-reinforcing powers. It’s a tragedy, but a self-inflicted one. Personally, I think the tipping point has already been passed. I’m not optimistic.

Joshua I also live in a country that although nominally a unicameral democracy (based on the westminster system)…the trend in government has been towards a concentration of power in government, without any engagement of parliament, I have grown to respect the US system (especially after reading some of your posts/essays) and i guess for someone who is living in a country that has some similarities to the situation in Russia, my heart is torn between leaving and making a fresh start elsewhere, for example Australia. Or staying and trying to be part of a push to rectify things here.

I guess what I struggle with is should i stay here and try to spend years and years trying to better things in my own country, or move to another country which rewards individual ability and has a society that promotes equality for all.

The decision between trying to stay and reform your home system and setting sail for greener pastures so you and your family have a better opportunity to thrive based on your talent and work ethic is a difficult one that involves decisions based on your personal values. For me, part of it would depend on how far gone the system in my home country was.

I think of human talent like a seed. I’ve said it before, but it is worth repeating: There is going to be an enormous difference in the outcome for a rosebush planted in the middle of a desert and a rosebush planted in full sun, next to a flowing river, surrounded by lush green grass. The seed is the same. The genetics are the same. The plant’s potential is exactly identical. Yet, the health, quality, production, and beauty of the plant are going to be vastly different in the two scenarios based entirely on the soil.

In the case of a nation like Russia, I’d have left six months ago because I’m not sure it can be saved short of yet another in a long string of violent revolutions. It’s a second world nation where the typical family is lucky to earn $16,000 per year (this should be bumped a little bit to provide purchasing power parity due to the lower cost of living in Russia, but not by much). Here, in the United States, our poorest state – the one everyone makes fun of and that is constantly mocked due to its demographics being so far behind the other 49 states – is Mississippi. Yet, Mississippi has a typical household income of almost $39,000 per year. In fact, what we consider Mississippi’s problems – things like too high a birth rate for young mothers – are desperately needed in Russia. It doesn’t take a genius to see that the system in nations such as the United States, Canada, Germany, et cetera, is vastly superior when our poor are twice as rich as the typical family in Russia. There are smart, intelligent, hardworking people living in the suburbs of Moscow right now that would enjoy a standard of living two or three times what they are used to if they, instead, lived in a suburb of Columbus or Miami or Kansas City.

Should you stay or should you go? I can’t answer that for you. If I were in your situation, I would go for a walk, by myself, and sit alone for a few hours. I’d picture myself as a very old man, with children and grandchildren, and imagine how I wanted my life to look; the opportunities I’d want for them, the type of place I’d want to raise them. Then, I’d find the nation that would allow me to achieve that, or at least give me the greatest chance to pursue it. I’d want long life expectancies and good education; low poverty rates and little to no violence; strong free markets where I could pursue my dreams and a developed banking system where it was possible to secure financing or raise money for startups. That would be my checklist.

Jason Spacek

Russia has always scared the s*** outta me. And that’s coming from someone about to willingly & happily move to China(for business reasons).

FratMan

“Were I a Russian citizen, I would be out of there right now, with my eyes on a nation such as Canada or Switzerland.”

Should there be any moral obligation to “stand and fight to improve” your country, or should someone flee a country when there are signals of trouble so that he can better fulfill his own pursuit of happiness? In your view, does “being a man” involve sacrificing your long-term happiness for the sake of something like fighting to improve your country? Or should the calculation be purely in terms of personal utility and happiness, without a general regard for one’s communal upbringing?

In other words, do you believe certain responsibilities exist that should trump the “it’s my life, and I’ll do what I want” philosophy? I’m curious for your take on this one.

Adam

“being a man” Why can’t there be women doing the same for their country?

FratMan

Adam, sure. Since Joshua is male, and since I am male, I used that gender. If either of us were female, I might have said “being a citizen” or something to that effect.

archont

Stand up and fight yes, but “for your country” not so much. We, the international readers of this blog are the offspring of globalization. We physically live in our states and countries scattered over the globe, but those countries are becoming less and less relevant. It matters not who’s in power, the economy is shaped by global entities whose presence is required to achieve a high standard of living, regardless of whether the ruling party leans to the left or right, fundamentalist or libertarian.

Do what’s best for yourself and your community. I believe the best systems of government are bottom-up, not top-down – and it’s easier to lose touch with reality if you entertain the notion of saving a nation, instead of solving the problems of the few hundred people of your local community.

I remember my Russian history class I took in high school. Specifically, I remember the one huge takeaway from that class: Russian history sucks. Not the class, their actual history. There were the Mongols. Life sucked then. Then there were the csars. Life sucked then. Then there was communism. Life sucked then. Now there is, well, I’d say its a quasi-dictatorship they have now. Life sucks now.

At some point you have to stop blaming bad luck and start blaming the culture. I don’t know how else to explain it. It’s as if the people secretly desire to life in poverty and find the leader who will best get them there. When Putin was first elected, I was mildly concerned. When he started implementing policies that curtailed people’s freedoms I had a feeling they were headed downhill. When I heard Putin would not be running for a third term, I was briefly relieved until I learned he was going to be prime minister. When I heard Putin was running for president again I gave up. I think it is Russia’s fate to live like this.

TheLonelyHumanist

I concur. I just wonder what makes the culture lean in the directions it does?

I’m not sure what you’re finding because they’re correct and fairly historically stable so not that out of the ordinary compared to the past decade; it’s nothing new.

For this post, I used the International Monetary Fund, 2012, Nominal Currency Denominated in U.S. Dollars for Comparison (Purchasing Power Parity, or PPP Adjustment). You can either go to the IMF itself or just use the comparison tables at Wikipedia (whomever coded them did a very good job), which can be found here.

Or you could go directly to the Central Intelligence Agency (CIA), which calculates current GDP per capita at $49,800 in its most recent World Factbook reference, updated June 5th, 2013 with revisions.

I figured out what is happening. That Google interactive data set you are looking at is pulling figures from the IMF data set but presenting them in a sort of idiotic way by not disclosing which particular sub-set of data they are using, making comparisons difficult.

Click on the bottom of the chart where it says Data from IMF, October 2012 WEO. Last updated: Oct 8, 2012. It will take you to this page. Then click on “By Countries (country-level data), which will take you to this page. Then click on Advanced Economies, which will take you to this page. Click “Clear All”, and then check only Canada and the United States. Hit continue, then on the next page, click “Gross domestic product per capita, current prices National currency, Gross domestic product per capita, current prices U.S. dollars, and Gross domestic product based on purchase-power-parity (PPP) per capita GDP current international dollar. Then click “continue”. Make the start year 2002. Make the final year 2012. Click “prepare report”. It spits out this (see attached).

In U.S. dollar parity, Canada has a slightly higher GDP per capita. When you adjust for the “international dollar” the U.S. has meaningfully higher higher purchasing power parity (20%+). The Google Dataset isn’t showing you clearly which calculation it is doing.

It’s one of those subtleties of economies. Canada’s GDP per capita in U.S. dollars was $50,826 was last year compared to the U.S.’s $49,802 in this particular revised data set. There’s no real difference when viewed in this light.

The lower figure that you’re seeing for Canada is if you ran both countries through something known as the Geary-Khamis dollar, aka the international dollar. It is a theoretical construct, a fictional currency, meant to attempt to measure how much stuff you could get with $1.00 of this imaginary greenback if you lived in a particular nation. It is tied to the U.S. to compare how much the same $1.00 would have bought you in the United States at a given period of time. It is difficult to use, and should be taken with a grain of salt, because when you combine it with PPP (purchasing power parity), you can’t really compare apples to apples. It might be lower in Canada, but in Canada you won’t fall off a bridge and find yourself with $200,000 in medical debt that you can’t pay because of the health care system. Capturing all of those real-world factors to measure quality of living is nearly impossible so it’s a rough estimate. The truth lies somewhere in between.

In an absolute sense, the U.S. dwarfs Canada collectively, with the respective gross domestic products as currently revised (it takes time to get the final numbers so there are multiple revisions, hence multiple data sets, once a year has ended), in U.S. Dollars, coming to $15.653 trillion and $1.77 trillion. So the standards of living are nearly comparable but the overall wealth in the United States is exponentially higher.

Thanks for giving me a chance to geek out; I didn’t expect Geary-Khamis dollars to come up today, haha!

(P.S. The Canadian relative strengthening to the U.S. since 2009 when measured in U.S. dollars is due, in part, to the fact that the Canadian national budget has been much healthier in terms of debt management than the United States budget over the past few years. Hence, the Canadian dollar strengthened substantially against the United States dollar, having a large influence on these figures since we are comparing them in U.S. dollar equivalents.)

Matt

“I used the International Monetary Fund, 2012, Nominal Currency Denominated in U.S. Dollars for Comparison (Purchasing Power Parity, or PPP Adjustment)”

I’m confused by this statement, as it seems you used the nominal (not PPP adjusted) GDP. (For US, they would be equal, but the 67,723 Austrailian GDP per capita (nomnial) would be worth only $42,640 using the IMF 2012 PPP list.)

What are the differences between using PPP and nominal exchange rates in comparing GDP per capita, and which one would more reflect economic reality?

You’re right to be confused because I mistyped when I responded to that comment (you can see the actual figures in the attachment to my other response to reader Graham, including nominal, U.S. equivalent, and purchasing power parity). It should have read non Purchasing Power Parity. Thank you for catching that; I corrected it just now.

As for which one is better in reflecting economic reality, see my other comment to Graham on this thread.

PPP attempts to figure out how much money it would take to buy an identical bundle of goods in one nation versus another. Say, a basket of wheat, a pair of shoes, a pound of coffee, a new car, etc.

In theory, PPP should be a better indicator but it has some significant flaws because it is impossible to capture all of the factors that play into what humans value. For example, it can’t reflect if you live in an island paradise with perfect weather and gorgeous views of the sea. It’s can’t fully capture the fact that certain economies have more inherent risks (e.g., you slip and fall in the United States, you could end up bankrupted because you owe six-figures in medical debt whereas in Canada, the health care system would pick up most of the tab).

What makes it even more confusing is the fact that GDP per capita is really just a back-of-the-envelope way to get at real standards of living. It’s imperfect.

For example, the Median household income for a family of two in the United States is bouncing around between $48,000 and $52,000 right now. The same household in Canada is earning between $65,500 and $78,800 (the range is the result of slightly different measurement methodology).

Yet, when you look at singles – say a recent college grad off on his or her own living in an apartment – the figures are closer together.

My opinion? Neither. You can’t just use one metric to paint a broad stroke, they are more like general guidelines that give you an idea of relative comparisons. It’s not hard to see that life in France is vastly superior to life in Russia, for example. The minitia beyond that is going to require you to delve into data and look at specific circumstances (e.g., “How much does a pound of coffee cost in Paris vs. Moscow, measured in the amount of hours it takes for the typical family to earn?”).

Shouganai

“It is not enough for a man to disapprove of Pimlico: in that case he will merely cut his throat or move to Chelsea. Nor, certainly, is it enough for a man to approve of Pimlico: for then it will remain Pimlico, which would be awful. The only way out of it seems to be for somebody to love Pimlico: to love it with a transcendental tie and without any earthly reason. If there arose a man who loved Pimlico, then Pimlico would rise into ivory towers and golden pinnacles”

crabhooves

I’ve always found Russia an interesting topic. I think of Russia as existing in its own little universe marching to the beat of its own drum. I think that on the whole the world is becoming more liberal, socially. I believe that society gradually shifts to the left over time (liberals in our grandparents time are conservatives in our time). Russia has bucked that trend over and over again, it doesn’t follow the same trends as the rest of the world, whenever it looks like it is on the path to true modernity something comes along and averts it. Some days I wish I could live forever, what a joy it would be to watch the story of Russia (and so many other nations) unfold with the perspective of centuries.

joespr

>>All else being equal, a society that is repressed will always fall behind a society that is free.

Joshua, I would think an article about your views about China, in respect to this quote from your article on Russia, would be of great interest.

If you happen across the paper you wrote, feel free to send a link to me through the contact form. It sounds like something I’d love to read.

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Since 2001, Joshua Kennon has been the Investing for Beginners Expert at About.com. In the going-on two decades since he first published for the network, he has built up a body of work of more than 1,000 articles, essays, and lessons that are available to read for free, covering everything from how to analyze a balance sheet to strategies for portfolio risk reduction. More formally structured than the content on this personal blog, they are a fantastic introduction to the basics of wealth building and asset management for new and experienced investors alike.

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